Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Gold Hits Two-Week High as Jobless Data Stoke Global Deflation Fears

Published 05/14/2020, 11:28 AM
Updated 05/14/2020, 11:31 AM
© Reuters.

By Geoffrey Smith 

Investing.com -- Gold prices rose to their highest in over two weeks after new data showed that over a quarter of the U.S. has become unemployed since the Covid-19 pandemic struck.

By 11:25 AM ET (1525 GMT), gold futures for delivery on the Comex exchange were up 1.4% at $1,740.20 a troy ounce, having earlier hit a two-week high of $1,746.25. Spot gold was up 0.9% at $1,731.07 an ounce.

Silver futures were up 2.4% at $16.05, while platinum futures were up 0.3% at $772.30 an ounce.

Having drifted gently downwards in a pennant formation over the last week, the yellow metal appeared to have broken cleanly through resistance around $1,730.

The move was made possible by U.S. initial jobless claims data for last week in the U.S., which totaled 2.98 million. That was down from over 3 million the week before but well above forecasts for a number around 2.5 million.

The data helped reinforce expectations if not of negative interest rates next year, then at least of a prolonged period of economic weakness that will require further support from both the government and the Federal Reserve.

Nor is the situation any better in Europe, where expectations have grown in recent days that U.K. interest rates will go below zero after new Governor Andrew Bailey refused to rule out the possibility in comments earlier in the week. Meanwhile, the European Central Bank has shrugged off any suggestion that it will be frightened off increasing its asset purchases by the German Constitutional Court’s ruling last week that cast doubt on its ability to buy bonds.  

Analysts at ABN Amro said in a note to clients on Thursday that they expect a double-dip recession for the euro zone, and a meaningful recovery only in the spring of 2021.

“The risks of a sustained period of modest deflation are now significant,” analysts led by Nick Kounis wrote. "As such, large-scale net asset purchases are likely to be part of the eurozone landscape for the foreseeable future.”

ABN also expects the Bank of England to increase its quantitative easing program by 100 billion pounds at its next policy meeting in June.

Latest comments

is deflation meaning Gold Price will go higher?
gold now protects against deflation and drops during global pandemics with periods of hyperinflation and market collapse? got it...
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.